AEP Announces Plans to Retire Coal-Burning Plant in Eastern Kentucky

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A coal-fired power plant in eastern Kentucky will be retired in the next several years.

Originally, American Electric Power subsidiary Kentucky Power planned to spend nearly a billion dollars to install pollution controls on the Big Sandy Power plant in Louisa so it could continue burning coal under upcoming federal pollution regulations.

But the company withdrew that plan from the Public Service Commission in May, saying it wanted to reexamine its options. Now, the new plan is to retire the plant in 2015 and transfer half of the generation from a power plant in West Virginia to the eastern Kentucky service area.

“We have to do what’s in the best interest of our customers,” Kentucky Power spokesman Ronn Robinson said. “And this plan will reduce the impact on them from about thirty-one percent under the scrubber plan to about eight percent under this transfer plan.”

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The Mitchell Generation Station in Moundsville, West Virginia, is owned by AEP’s Ohio subsidiary, and it still burns coal. But Robinson says it already has the necessary pollution control equipment.

If the new proposal is approved by the Public Service Commission, the generation from the Mitchell Plant will replace Big Sandy Unit 2. Robinson says the company is still trying to decide what to do with Unit 1—it will likely be retired in 2015 as well, and could be replaced with either purchased generation from somewhere else or with a natural gas-fired unit.

Robinson estimates 150 full-time employees will be affected, though the company will place as many as possible in other jobs at the company.

Big Sandy burns about 2 million tons of coal each year, and most of that coal is sourced locally in eastern Kentucky. Though AEP is replacing the plant’s coal-fired electricity generation with existing coal-fired power, that’s still a blow to the state’s coal industry and the retirement of the plant speaks volumes about the economic feasibility of burning coal.

AEP’s plans for Big Sandy have changed drastically over the past year and a half. First, the company considered converting the plant to natural gas. Here’s the reaction, as chronicled in a May 2011 New York Times story:

“Have you lost your mind?” State Representative Rocky Adkins, a Democrat and one of Kentucky’s most powerful politicians, thundered at Michael G. Morris, the chairman of the plant’s operator, American Electric Power, during an encounter last summer. “You cannot wave the white flag and let the environmentalists and regulators declare victory here in the heart of coal country.”

Then, the company reassured the coal industry, saying that the fossil fuel would continue to be burned at Big Sandy. This is from a story I did in December, 2011:

The plant is old, by power plant standards—both units were built in the 1960s. But Kentucky Power spokesman Ronn Robinson says it’s still cheaper to spend $940 million to keep burning coal. He adds that it’s also better for the surrounding community’s economy.

“So what that means to the basic community is continued jobs, continued use of coal, which relates to many, many, many other jobs in that area, contributions to local tax bases as well as to other economic entities in that area,” he said.

There was a similar argument in April, when Kentucky Power went before the Kentucky Public Service Commission to defend its application to spend nearly a billion dollars to install pollution scrubbers and keep burning coal:

Kentucky Power’s first witness—regulatory director Ranie Wohnhas—was on the stand most of the day. He says the proposal could raise rates as much as 29 percent, but it’s the most cost-effective option. Wohnhas argues that it makes financial sense for the Big Sandy plant to keep burning coal—especially when the economic impact to eastern Kentucky is taken into account.

“Customers and the workers that are in the coal mines feel that mining of coal to deliver to Big Sandy and to other places is a very important part…so they are a business working to provide their product at a reasonable price to the market,” he said.

Spokesman Ronn Robinson said the company made the decision to reconsider alternatives to coal because outlooks suggest more energy capacity in the market in the next few years. “We will look at everything again,” he said. “We will look at the continued use of coal, the scrubber may stay an option, we will look at gas, we will do a total review, in light of the new energy landscape to make the decision that’s in the best interest of our customers and ratepayers.”

The news the Big Sandy Plant will be retired is a victory for environmental groups, which argued against the continued operation of the coal-fired power plant. Shannon Fisk from Earthjustice argued against the scrubber proposal in front of the PSC earlier this year, and called the new plan a victory for rate payers and the environment.

“Certainly retiring the plant avoids the 34 percent rate increase that American Electric Power had proposed and opens up the opportunity, we hope, for the company to pursue cleaner alternatives that could both protect public health and create jobs,” he said.